UPDATE 1-Yum's July China restaurant sales drop more than expected
Aug 12 (Reuters) - KFC parent Yum Brands Inc on Monday reported a 13 percent drop in July sales at established restaurants in China, a steeper-than-expected fall after back-to-back blows from a food safety scare and a bird flu outbreak in its most important market.
The July result was something of a setback for Louisville, Kentucky-based Yum, which in recent months had seen same-restaurant sales declines ease.
Shares in Yum fell $2.86, or 3.8 percent, to $74.47 in after-hours trading.
Analysts, on average, had expected a 7.1 percent decline in China's July same-restaurant sales, according to Consensus Metrix.
Yum generates more than half of its overall operating profit in China, where it is the biggest Western restaurant operator with roughly 6,000 mostly KFC restaurants.
Yum executives repeatedly have said that the company has dealt with crises in China before.
In a regulatory filing on Monday, Yum reiterated that it expects same-restaurant sales in the world's fastest-growing major economy to turn around in the fourth quarter.
Yum's China sales swoon began at the end of 2012, when the discovery of excessive levels of antibiotics in chicken from two of Yum's suppliers prompted government food safety agencies to probe the company's supply chain.
Yum was not fined by food safety authorities, but it suffered a widespread backlash in the mainstream media and on social media sites.
As those concerns waned, worries about a new bird flu gripped the nation and battered chicken sales.
The World Health Organization on July 20 said it had been informed of 134 laboratory-confirmed cases, including 43 deaths, of the novel H7N9 bird flu virus in China.
Now, there are worries that China's cooling growth could keep a lid on demand for fried chicken and other fast food.
Once boasting double-digit growth, China is now expanding at a more modest 7.5 percent rate and there are concerns that its credit markets are overheated and its housing market is in bubble territory.